Financial Highlights : Results 2018


  • Underlying operating profit up 21% to £8.8million

  • All regions profitable

  • Underlying operating margin up to 2.7%, on way to achieving the strategic target of 3%

  • Underlying earnings per share up 24% to 15.38p per share

  • Dividend increased by 14%

  • Debt free, strong cash balance at year end


2018 underlying Group performance

The Group’s underlying performance for the year ended 31st December 2018 was strong, with both revenue and profit being slightly ahead of the Group’s upgraded trading update on 27th November 2018. Revenue rose by 5% to £326.8 million for the year (2017: £311.2 million). Group underlying operating profit increased by £1.5 million to £8.8 million. All businesses were profitable with the Central and South West region recording an operating profit of £1.8 million compared to a loss in 2017 £1.8 million. London and South East remains the core of the business delivering an underlying profit of £7.2 million; a 3.7% margin.

The Group has a medium-term target of 3% underlying operating margin. Good progress has been made towards this with 2018 margin rising to 2.7% (2017: 2.3%).

We move into 2019 with a forward order book at a record £411 million (2017: £337 million) providing excellent revenue visibility. Year end cash was £12.4 million (2017 net cash £11.7 million) with the Group being free of any debt.

Technology revenue in 2018 more than doubled when compared to 2017. Improving our technology market share is a core strategic objective.

London and South East

Revenue from our London and South East operations increased by 11% to £196.5 million (2017: £177.6 million), generating an underlying profit of £7.2 million (2017: £8.5 million). Underlying operating margin was 3.7% (2017: 4.8%). 2017 saw a large number of projects completing in the year releasing significant profits.

For 2019 the region is engaged on a number of high-profile shell and core commercial developments, all of which offer future fit out opportunities. A number of areas continue to be regenerated and offer large-scale mixed commercial and residential opportunities such as the International Quarter London, Battersea Power Station, Kings Cross and the area of Bishopsgate, London.

Central and South West

Revenue from our Central and South West operations increased by 17% to £73.0 million (2017: £62.6 million). Underlying profit was £1.8 million (2017: loss £1.8 million). South West returned to profitability after more than doubling turnover and delivering high quality projects.

In the Central area we continue to target opportunities in the residential, retail and FM markets. In particular, we have established an FM operation in Birmingham.


Revenue reduced by 25% to £36.1 million (2017: £48 million), and underlying operating profit reduced to £2.0 million (2017: £2.4 million). Underlying operating margin remained strong at 5.5% (2017: 5.0%) as a result of an excellent performance from the Leeds office due to the successful delivery of a number of educational projects and a growing small works offering.

Looking forward, we have very recently opened new offices in Manchester and Liverpool and already have a number of exciting opportunities. Leeds continues to see opportunities from its relationships, notably in education and other public sectors such as prisons.


Scotland’s revenue was £21.2 million (2017: £23.0 million), and underlying operating profit was £0.8 million (2017: £0.8 million), representing an underlying operating margin of 3.8% (2017: 3.5%). Scotland’s continued strong performance was due in part to its collaboration on Intelligent Buildings with the London Operation. As well as its continuing strength in the residential market, Scotland has generated significant IT, mechanical and electrical workstreams in the commercial sector.

There remains a good level of opportunity in and around the Scottish central belt and further afield in key Scottish towns where we have a presence, such as Aberdeen and Dumfries.

Non-underlying items

Non-underlying items comprise a net recovery of misappropriation of funds that occurred in 2016 of £0.9 million, offset by settlement costs of the former Group Finance Director (£0.3 million) and Group Reorganisation costs (£0.6 million). In addition, amortisation of intangible assets totalling £0.2 million.

Finance costs

Net finance costs were £0.8 million (2017: £0.8 million), including a £0.6 million (2017: £0.6 million) non-cash financecharge in respect of the Group’s defined benefit pension scheme. Net interest on bank facilities remained at £0.2 million (2017: £0.2 million), reflecting good cash performance throughout the year.

Earnings per share

Reported earnings per share increased to 14.99p (2017: 13.44p). Basic underlying earnings per share after adjusting for amortisation of intangible assets and non-underlying costs and the tax effect of these items, was 15.38p (2017: 12.37p).


The Board is proposing a final dividend of 3.34p (2017: 2.90p), with the total dividend for the year increasing by 14% to 4p (2017: 3.5p). The dividend is covered 3.8 times by underlying earnings.

The final dividend will be paid, subject to shareholder approval, on 24th May 2019 to those shareholders on the register at 26th April 2019. The shares will go ex-dividend on 25th April 2019. A dividend reinvestment plan (‘DRIP’) is available to shareholders.

Pension obligations

The triennial valuation of the pension scheme at 31st December 2015 showed a deficit of £14.9 million, representing a funding level of 67% (2012 valuation: deficit £11.5 million, funding level 68%).

The Group has been pursuing an agreed deficit reduction plan over a number of years; however, market factors have meant that the deficit has not been reduced as intended and the cost of funding current pension commitments has increased. Following agreement of the 2015 valuation, the Group proposed a revised deficit reduction plan which includes making additional contributions and continuing to provide security to the pension scheme in the form of a charge over property assets up to a combined market value of £3.1 million.

From 1st January 2017 the future service contribution increased to 21.4% of pensionable payroll (including employee contributions) and the deficit reduction contribution was set at £1.0 million for the year ending 31st December 2017, rising to £1.25 million for the year ending 31st December 2018 and £1.5 million per annum thereafter. Employee contributions have increased from 8% to 10%.

The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.

In accordance with IAS 19 ‘Employee benefits’, an actuarial income of £0.6 million, net of tax, has been recognised in reserves, with the pension scheme deficit falling by £0.4 million to £23.0 million (2017: £23.4 million). This liability includes a £0.2 million charge that has been expensed through the consolidated income statement being the estimate for the impact of GMP equalisation for the above scheme.

Cash flow and funding

Net cash balances improved to £12.4 million at 31st December 2018 (2017: £11.7 million) after deducting the £nil (2017: £3.0 million) outstanding under the Group’s revolving credit facility.

The Group has a £15.0 million revolving credit facility, which is committed until 31st August 2022, and a £5.0 million overdraft facility, renewable annually. Interest on overdrawn balances is charged at 2.0% above base rate, and interest on balances drawn down under the revolving credit facility is charged at 1.7% above LIBOR, fixed for the duration of each drawdown (typically three to six months). The Group was compliant with the terms of the facilities throughout theyear ended 31st December 2018 and the Board’s detailed projections demonstrate that the Group will continue to meetits obligations in the future.

The Board’s detailed cash flow projections include an allowance for the impact of a change in VAT regime from 1st October 2019. From this date the Government is planning to introduce a VAT domestic reverse charge for building and construction services. Under this scheme TClarke will continue to charge VAT to end customers but will no longer beable to charge VAT to contractors and will not pay VAT on costs incurred with subcontractors. The Board’s projectionsshow a healthy cash position after taking account of this change of regime.

The Group also has in place £40.1 million of bonding facilities, of which £20.2 million were unutilised at 31st December 2018.

Net assets and capital structure

The Group is funded by equity capital, retained reserves and bank facilities, and there are no plans to change this

structure. The strong underlying performance of the Group has resulted in shareholders’ equity rising by £5.7 million during the year to £22.1 million (2017: £16.4 million).

Goodwill and intangible assets were £25.7 million (2017: £25.9 million). The Board has undertaken a rigorous impairment review in respect of the intangible assets at 31st December 2018 and concluded that no impairment is necessary.

Accounting policies

The Group’s consolidated financial statements are prepared in accordance with International Financial ReportingStandards (‘IFRSs’) as adopted by the European Union. The Group has adopted IFRS 15 ‘Revenue from contracts with customers’ and IFRS 9 ‘Financial instruments’. Under IFRS 15 revenue can only be recognised when it is ‘highly probable’and so, for example, claims cannot be recognised until agreed. A variation cannot be recognised unless it is highly probable that no significant reversal of the cumulative revenue will occur. Revenue on FM jobs is recognised when the job is complete. IFRS 15 is closely aligned to the Group’s previous revenue recognition policy and therefore adoptingIFRS 15 has had no material impact on the Financial Statements.

The impact of IFRS 9 on the Group relates to the recoverability of receivables after taking account of lifetime expected credit losses. The Group has historically experienced very low levels of ‘bad debts’, with £0.2 million being charged tothe income statement in both 2018 and 2017. Therefore, the adoption of IFRS 9 has had no material impact on the Group.

In addition, the Group has completed its assessment of the impact of IFRS 16. This standard will be adopted for the first time in the accounts for the year ended 31st December 2019.

Financial risk management

The Group’s main financial assets are contract and other trade receivables, cash and bank balances. These assets represent the Group’s main exposure to credit risk, which is the risk that a counterparty will fail to discharge its obligations, resulting in financial loss to the Group. The Group may also be exposed to financial and reputational risk through the failure of a subcontractor or supplier.

The financial strength of counterparties is considered prior to signing contracts and reviewed as contracts progress where there are indications that a counterparty may be experiencing financial difficulty. Procedures include the use of credit agencies to check the creditworthiness of existing and new clients and the use of approved suppliers’ lists and Group-wide framework agreements with key suppliers.

Trevor Mitchell

Finance Director

26th March 2019

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